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Please help with the Balance in the Investment in Sword Account, Thanks. Prince Corporation holds 75 percent of the common stock of Sword Distributors Inc.,
Please help with the Balance in the Investment in Sword Account, Thanks.
Prince Corporation holds 75 percent of the common stock of Sword Distributors Inc., purchased on December 31,201, for $2,160,000. At the date of acquisition, Sword reported common stock with a par value of $930,000, additional pald-in capital of $1,280,000, and retained earnings of $550,000. The falr value of the noncontrolling interest at acquisition was $720,000. The differential at acquisition was attributable to the following items: During 202, Prince sold a plot of land that it had purchased several years before to Sword at a gain of $16,800; Sword continues to hold the land. In 206, Prince and Sword entered Into a five-year contract under which Prince provides management consulting services to Sword on a continuing basis; Sword pays Prince a fixed fee of $93,000 per year for these services. At December 31,208, Sword owed Prince $23,250 as the final 208 quarterly payment under the contract. On January 2, 20x8, Prince paid $260,000 to Sword to purchase equipment that Sword was then carrylng at $300,000. Sword had purchased that equipment on December 27,202, for $450,000. The equipment Is expected to have a total 15 -year life and no salvage value. The amount of the differentlal assigned to goodwill has not been Impalred. At December 31,208, trial balances for Prince and Sword appeared as follows: As of December 31,208, Sword had declared but not yet pald its fourth-quarter dividend of $5,000. Both companles use straight-line depreciation and amortization. Prince uses the fully adjusted equity method to account for its Investment in Sword. b. Verlfy the balance In Prince's Investment In Sword Distributors account as of December 31,208. Prince Corporation holds 75 percent of the common stock of Sword Distributors Inc., purchased on December 31,201, for $2,160,000. At the date of acquisition, Sword reported common stock with a par value of $930,000, additional pald-in capital of $1,280,000, and retained earnings of $550,000. The falr value of the noncontrolling interest at acquisition was $720,000. The differential at acquisition was attributable to the following items: During 202, Prince sold a plot of land that it had purchased several years before to Sword at a gain of $16,800; Sword continues to hold the land. In 206, Prince and Sword entered Into a five-year contract under which Prince provides management consulting services to Sword on a continuing basis; Sword pays Prince a fixed fee of $93,000 per year for these services. At December 31,208, Sword owed Prince $23,250 as the final 208 quarterly payment under the contract. On January 2, 20x8, Prince paid $260,000 to Sword to purchase equipment that Sword was then carrylng at $300,000. Sword had purchased that equipment on December 27,202, for $450,000. The equipment Is expected to have a total 15 -year life and no salvage value. The amount of the differentlal assigned to goodwill has not been Impalred. At December 31,208, trial balances for Prince and Sword appeared as follows: As of December 31,208, Sword had declared but not yet pald its fourth-quarter dividend of $5,000. Both companles use straight-line depreciation and amortization. Prince uses the fully adjusted equity method to account for its Investment in Sword. b. Verlfy the balance In Prince's Investment In Sword Distributors account as of December 31,208Step by Step Solution
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